A PRESENTATION ON INSURANCE SECTOR
Presented By Amith Ahuja Naveen Kumar G N Achala K P Shreedhar R I
In the beginning was . . . Insurance? Maybe not
Over 4,000 years ago Hammurabi, King of ancient Babylon, introduced a crude form of life and robbery insurance
By the middle of the 14th cent., as evidenced by the earliest known insurance contract (Genoa, 1347), marine insurance was practically universal among the maritime nations of Europe In London, Lloyd's Coffee House (1688) was a place where merchants, ship-owners and underwriters met to transact business. By the end of the 18th cent.
In India, insurance has a deep-rooted
history. It finds mention in the writings of Manu (Manusmrithi ), Yagnavalkya ( Dharmasastra) and Kautilya (Arthasastra). The writings talk in terms of pooling of resources that could be re-distributed in times of calamities such as fire, floods, epidemics and famine.
Origin Of Insurance In INDIA
The first life insurance company to operate in India the Oriental Life Insurance Company was established in 1818 in Calcutta. The first Indian insurance company was 'Bombay Mutual Assurance Society Ltd.' formed in 1870. As the Swadeshi' movement was catching up many more Indian companies were formed. The Insurance Act, 1938, the first comprehensive legislation governing both life and non life branches of insurance was enacted to provide strict state control over the insurance business.
By the mid 1950s, there were 154 Indian insurers, 16 foreign insurers and 75 provident societies carrying on life insurance business in India. - In 1956, 245 Indian and Foreign life insurers and provident societies were nationalized, and new single entity namely LIC was established by passing the LIC Act, 1956. - Similarly, in 1972, 107 general insurers were nationalized through the passing of
Definition of Insurance
Insurance has been defined in many ways; Willet defines insurance as the social device for making accumulations to meet uncertain losses of capital which is carried out through the transfer of risks of many individuals to one person or to a group of persons. a promise of compensation for specific potential future losses in exchange for a periodic payment
How Insurance Works
The underlying concept behind insurance is sharing of risks by pooling of funds. Groups of people sharing similar risk come together and make contribution towards a pool and the money so collected is used towards compensating for any losses suffered by members of the pool.
When the pool is managed by the individuals it is called mutual insurance and when it is
Is INSURANCE AN INVESTMENT OR RISKCOVERAGE..?
Insurance has peculiar trend..!
According to market statistics, more than 50% of the insurance policies are taken only with the primary intention of securing a tax rebate under section 88. The rest are either considered as savings or investment plans. Very few people take insurance for risk coverage. Lack of insurance education has largely contributed to the ignorance about the importance of pure risk covers. Insurance is neither a place for investment nor a place for savings. If you require the combination of savings, protection and investment plan, you
Elements Of Insurance Contract
All insurance purchases involve contracts. Contracts are legally binding agreements which mean that the parties to the contract have legal recourse in the event of one of the parties not adhering to the terms of the contract. All valid contracts must have the following four elements: 1. Offer and Acceptance, 2. Consideration, 3. Capacity 4. Legal purpose
Essentials Of Insurance Contract
While all the contracts should have the above mentioned four features to be legally binding, an insurance contract has some special characteristics while at the same time adhering to the above mentioned features. The special features of an insurance contract are : 1. Principle of indemnity 2. Rules of insurable interest 3. Subrogation in insurance 4. Doctrine of utmost good faith
CLASSIFICATION OF INSURANCE
LIFE INSURANCE
As the name denotes, Life Insurance deals with insurance of human life it is a written contract between the insured and the insurer, that provides for the payment of the insured sum on the date of the maturity of the contract or on the unfortunate death of the insured, whichever occurs earlier. Types of Insurances a. Term Life Insurance b. Permanent Life Insurance
TERM LIFE INSURANCE
Under a Term Life contract, the insurance company pays a specific lump sum to the designated beneficiary in case of the death of the insured. These policies are usually for 5, 10, 15, 20 or 30 years. Term life insurance are the most popular in advance countries but were not so popular in India. However, after the entry of the private operators and aggressive marketing by few players this kind of policies are becoming
PERMANENT LIFE INSURANCE
In a Permanent Life contract, a portion of the money paid as premiums is invested in a fund that earns interest on a tax-deferred basis. Thus, over a period of time, this policy will accumulate certain "cash value" which you will be able to get back either during the period of the policy or at the end of the policy. This type of policy not only provides protection for your dependents by paying a death benefit to your designated beneficiary upon your death,
GENERAL INSURANCE
Non life deals with all insurance other than life. Non-Life insurance can be further classified into: A) Property Insurance B) Personal Insurance C) Liability Insurance
HEALTH INSURANCE
Just like one looks to safeguard ones wealth, these policies ensure guarding the insurer's health against any calamities that may cause long term harm to ones life and even hamper ones earning ability for a lifetime. Some examples of this type of policy are mediclaim policy, personal accident, group accident, traffic accident, etc.
AUTOMOBILE INSURANCE
Auto Policy is required to be taken to cover the risks that arise to the owner, vehicle and third party. This includes the Compulsory Vehicle Policy (In India, by the Motor Vehicles Act, every car owner is required to covered against Act risks) and the
MARINE INSURANCE It is a system of financial protection against the happenings of accidental or fortuitous events, such as; a) During sea transportation the goods may be lost due to sinking of the vessel. b) Damaged due to incursion of seawater into the holds of the ship during rough weather. c) During land transit, the goods may be lost damaged by the derailment of railway wagons or collision of motor goods vehicle. d) During transit and whilst in storage incidental to transit, the goods may catch fire or may be stolen.
FIRE INSURANCE
Fire insurance policy is suitable for the owner of a property, one who holds property in trust or in commission, individuals/financial institutions who have financial interest in the property all immovable and movable property located at a particular premises such as buildings, plant and machinery, furniture, fixtures, fittings and other contents
IRDA (Insurance Regulatory and Development Authority)
IRDAS MISSION
To protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. Composition of Authority under IRDA Act, 1999 As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development Authority (IRDA, which was constituted by an act of parliament) specify the composition of Authority. The Authority is a ten member team consisting of a. a Chairman; b. five whole-time members; c. four part-time members, (all appointed by the Government of India)
Duties, Powers and Functions of IRDA
Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA.
1. Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and reinsurance business.
2. Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority shall include: a. issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or
Duties, Powers and Functions of IRDA contd
b. protection of the interests of the policy holders in
matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance; c. specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents; d. specifying the code of conduct for surveyors and loss assessors; e. promoting efficiency in the conduct of insurance
Duties, Powers and Functions of IRDA contd
f. specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries;
g. regulating investment of funds by insurance companies; h. regulating maintenance of margin of solvency; i. adjudication of disputes between insurers and intermediaries or insurance intermediaries;
j. supervising the functioning of the Tariff Advisory Committee;
SEBI AS A PRIME REULATOR
Market regulator Securities and Exchange Board of India (SEBI) on Monday has notified Investment Advisors 2013 regulation which brings the requirements related to qualification, certification, capital adequacy, period of validity of certificate and other general obligations for investment advisors. According to the regulations, no person shall act as an investment advisor unless he has obtained a certificate of registration from the SEBI. The regulator has exempted a few individuals, including those who give general advice in good faith, or insurance agents who give investment advice
Major Players
Market Share
PRIVATE SECTOR COMPANIES
Several leading private sector companies have entered in the field of insurance sector, both in life and non-life insurance. -There are several MNCs, in Joint Venture with Indian private sector firms, have started Regd. Date of Name of the Who Owns it (in percentage) operations way. No. Regd. in a big Company
101 104 105 107 109 110 111 114 23.10.00 HDFC Standard Life 15.11.00 24.11.00 Max New York Life ICICI Prudential Life Standard Life, UK - 18 and HDFC 82 New York Life - 26 and Max India 74 Prudential, UK - 26 and ICICI Bank 74 Old Maruthi, South Africa 26 and Kotak Mahindra 74 Sun Life of Canada26 and Birla Capital 74 AIG, US 26 and Tatas 74 Cardif SA, France 26 and State Bank of India 74 ING, Holland26 and GMR Group, Hyd54 and ING Vysya Bank20
10.01.01 Om Kotak Mahindra 31.01.01 Birla Sunlife 12.02.01 Tata AIG 30.03.01 SBI Life 02.08.01 ING Vysya
PRODUCTS
Endowment Policy
The sum assured is payable on the death of the assured or after a fixed period of years whichever occurs first. Endowment policies are popular in India as it combines life assurance with investment option and appeals to the security conscious people. However, the premium under this policy is higher as the insurer has to definitely pay out a claim either to the beneficiary in the event of the death of the assured or to the insured if he lives up to a certain age. a. Joint Life Endowment Policy
Unit Linked
A ULIP is basically a combination of insurance as well as investment. A part of the premium paid is utilized to provide insurance cover to the policy holder while the remaining portion is invested in various equity and debt schemes. The money collected by the insurance provider is utilized to form a pool of fund that is used to invest in various markets instruments (debt and equity) in varying proportions just the way it is done for mutual funds.
Term Assurance
The term assurance provides pure death protection and does not have any savings element as some other insurance policies do. The premium under the term policies are lower as the policies are issued for a fixed period. However, this type of policy is not a great option as a saving instrument as the assured does not get any amount from the policy should he survive the policy period i.e. if the policy is issued for a period of 20 years expiring on 31st December 2012 and the insured is still alive on that date, he will not be entitled to receive any money under the policy.
Money Back Policies These policies provide for periodic payments of partial survival benefits during the term of the policy itself. A unique feature associated with this type of policies is that in the event of death of the insured during the policy term, the designated beneficiary will get the full sum assured without deducting any of the survival benefit amounts, which have already been paid as money-back components. Moreover, the bonus on such policies is also calculated on the full sum assured.
Life Insurance Corporation of India (LIC) was formed in September 1956 by an Act of Parliament, LIC Act 1956 with a contribution of Rs. 50 million. LIC has been one of the pioneering organizations in India who introduced the leverage of Information Technology in servicing and in their business. Data pertaining to almost 10 crore policies is being held on computers in LIC. Presently the LIC has a network of seven zones; 100 divisions and 2,048 branches, personnel exceed seven lakhs employees and over six
Objectives Spread Life Insurance widely and in particular to the rural areas. Maximize mobilization of peoples savings by making insurance-linked savings adequately attractive. Deployment of funds to the best of advantage of the investors as well as the community as whole, keeping in view national priorities and obligations of attractive return.
INVESTMENT POLICY OF LIC
GENERAL INSURANCE CORPARATION
In Nov. 1972, the general insurance business was nationalized by the General Insurance Business (Nationalized), Act 1972 (GIBNA) and vested in the hand of the GIC GIC was incorporated as a holding company in 1992. General Insurance Business is completely owned by the government. The paid up capital of GIC was fully subscribed by the Government and of four subsidiaries. It was controlled by a single organization with four subsidiaries
GICs four subsidiaries: 1. National Insurance Co. Ltd., 2. New India Assurance Co. Ltd., 3. Oriental Fire and General Insurance Co. Ltd., and 4. United India Insurance Co. Ltd.
TYPES AND STRUCTURE OF BUSINESS
- General insurance policies are not financial claims. - There is no guarantee of renewal of policy on the same terms or on any terms. - The contract is short-term contract. - The general insurance companies do not collect savings. - Policy claims are unpredictable. - Assets are held in relatively liquid form. - GIC meets the requirements of industrial, manufacturing, commercial, services, household, and agricultural sectors through wide rage of 115 products, granting insurance coverage. - GIC has been promoting insurance cover in the
Underinsured
A situation wherein the owner of a property or the person suffering a health condition does not have enough insurance to cover the value of the item or the health care costs.
Over insured
1: insured for more than the real value 2: insured in a greater amount than one can afford
Human Life Value Calculator
This calculator projects typical lifetime income for someone with the characteristics you provide in the input section, less taxes and expenditures devoted to your own consumption, plus any fringe benefits your family receives from your employer, such as health insurance, and the services you provide around the house.
The resulting estimate is an approximate measure of
INPUT SECTION FOR THE CALCULATOR
All fields are mandatory
Note: The Human Life Value is just indicative and a starting point in reference to your current ability to set aside money for you and your familys future financial security. Once you are convinced with the current HLV amount, you can choose various life insurance plans.
Taxation aspects of insurance
Life insurance premium and tax benefits In India, life insurance has been popularized by offering a number of tax incentives. The Income Tax act provides tax relief for investing in life insurance and investors use this form of investment for tax planning as well.
Any amount that you pay towards life insurance premium for yourself, your spouse or your children can be included under section 80C deduction.
Deductions allowable from income for payment of life insurance premium :
Under Section 80C
Under Section 80CCC
Under Section 80D
Jeevan Aadhar Plan (Sec.80DD)
EEE
Career Opportunities in Insurance Sector
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Insurance Broker Insurance Underwriter Risk Analysts Claims Inspectors
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